Court quashes service tax notice on Federation members, citing unconstitutional provisions.

The court partially allowed the petition, quashing the show-cause notice seeking to levy service tax under section 65(105)(zzze) of the Finance Act, 1994 on the members of the petitioner Federation. The court found that previous decisions had declared similar provisions ultra vires and unconstitutional, rendering the show-cause notice unauthorized and unsustainable.

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Issues:
Challenge to show-cause notices seeking to levy service tax under section 65(105)(zzze) of the Finance Act, 1994 on the members of the petitioner Federation.

Analysis:
The petitioners, an association of textile markets, challenged show-cause notices seeking to levy service tax under section 65(105)(zzze) of the Finance Act, 1994 on their members. The association comprises about 100 members managing buildings and premises of textile market associations. The show-cause notice dated August 3, 2010, aimed to recover service tax for maintenance activities of a specific textile market. The petition disputed the liability of members to pay service tax under this provision. The petitioner's advocate referred to a previous court decision declaring similar provisions ultra vires, arguing that the show-cause notice should be quashed.

The court was presented with conflicting arguments. The petitioners relied on a court decision declaring certain provisions of the Finance Act, 1994 ultra vires concerning levying service tax on services provided by clubs or associations to members. On the other hand, the respondents highlighted an explanation to section 65 of the Finance Act, stating that taxable service includes services provided to members by an association for valuable consideration. They argued that previous court decisions did not consider this provision and that appeals against those decisions were pending before the Supreme Court.

The court noted that the controversy in this case focused on challenging the show-cause notice concerning a specific textile market association under section 65(105)(zzze) of the Finance Act. Referring to previous decisions, the court found that the provisions in question were declared ultra vires and unconstitutional by the court, rendering the show-cause notice unauthorized and unsustainable. Consequently, the court partially allowed the petition, quashing the show-cause notice to the extent it invoked section 65(105)(zzze) of the Finance Act for the concerned association.

In conclusion, the court upheld the petition partly, quashing the show-cause notice issued under the Finance Act, 1994, to levy service tax under section 65(105)(zzze) on the members of the petitioner Federation. The decision was based on previous court rulings declaring similar provisions ultra vires and beyond legislative competence, rendering the show-cause notice without legal authority and unsustainable.

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